Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

Question 1
Chair Company (CC) has provided the following standard cost sheet.

Note that the input quantity multiplied by the cost per input equals cost per chair. Also note in this case
that manufacturing overhead (MOH) costs are being allocated on the basis of total direct labor hours
(DLH).

CC also disclosed the following actual information:

 5,000 pounds of plastic was purchased for $63,750, of which 4,600 was used in production.
 Molders were paid a total of $10,500 to work 575 hours and finishers were paid a total of
$29,000 to work 1,050 hours.
 1,100 plastic chairs were produced and sold during the year.

What is the direct labor rate variance based on the above information?

A. $1,750 Unfavorable
B. $1,750 Favorable
C. $750 Unfavorable
D. $750 Favorable

Question 2
Christopher Akers is the chief executive officer of SBL Inc., a masonry contractor. The financial
statements have just arrived showing a $3,000 loss on the new stadium job that was budgeted to show
a $6,000 profit. Actual and budget information relating to the materials for the job are as follows:

Which one of the following is a correct statement regarding the stadium job for SBL?

A. The flexible budget variance was unfavorable by $900.

B. The material price variance was unfavorable by $300.
C. The material price variance was favorable by $300.
D. The material efficiency variance was favorable by $1,200.
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

Question 3
Which of the following statements is correct concerning a standard cost system?

A. A standard cost system enables an organization to identify variances between actual and
expected performance.
B. A standard cost system uses price data but not quantity data.
C. A standard cost system calculates cost information after actual costs are available.
D. A standard cost system uses quantity data but not price data.

Question 4
Assuming overhead is applied on the basis of direct labor hours, which of the following is used in the
computation of the variable overhead spending variance?

A. Standard variable overhead rate based on actual hours: Yes; Standard variable overhead rate
based on standard hours: Yes
B. Standard variable overhead rate based on actual hours: No; Standard variable overhead rate
based on standard hours: Yes
C. Standard variable overhead rate based on actual hours: No; Standard variable overhead rate
based on standard hours: No
D. Standard variable overhead rate based on actual hours: Yes; Standard variable overhead rate
based on standard hours: No

Question 5
Chair Company (CC) has provided the following standard cost sheet.

Note that the input quantity multiplied by the cost per input equals cost per chair. Also note in this case
that manufacturing overhead (MOH) costs are being allocated on the basis of total direct labor hours
(DLH).

CC also disclosed the following actual information:

 5,000 pounds of plastic was purchased for $63,750 of which 4,600 was used in production.
 Molders were paid a total of $10,500 to work 575 hours and finishers were paid a total of
$29,000 to work 1,050 hours.
 1,100 plastic chairs were produced and sold during the year.

What is the direct labor efficiency variance based on the above information?
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

A. $1,750 Favorable
B. $1,750 Unfavorable
C. $750 Favorable
D. $750 Unfavorable

Question 6
Accounting Training, Inc. (ATI) provides continuing education seminars. These seminars are sold as a
continuing education event to accounting firms, which the schedule to bring in their own employees.
Seminars are held at hotels in a location that is convenient to the client organization. ATI has a large
number of certified seminar instructors that it contracts to travel to the event and provide the training.
The standard price for a training seminar event is $50,000. Below ar ATI's standard variable costs for a
seminar event.

In addition to the standard variable costs listed above, ATI has budgeted $100,000 as an annual fixed
cost for advertising.

For the year just completed ATI had originally planned for 80 seminar events with 75 participants per
event. ATI actually held 77 seminar events for the year with an average of 78 participants at each event
and collected $3,734,500 in revenue. ATI's actual costs and activity volumes are listed below.

What is the revenue price variance and volume variance?

A. Revenue Price Variance: $115,500 Favorable; Revenue Volume Variance: $150,000 Unfavorable.
B. Revenue Price Variance: $115,500 Unfavorable; Revenue Volume Variance: $150,000 Favorable.
C. Revenue Price Variance: $115,500 Unfavorable; Revenue Volume Variance: $150,000
Unfavorable.
D. Revenue Price Variance: $115,500 Favorable; Revenue Volume Variance: $150,000 Favorable.

Question 7
Chair Company (CC) has provided the following standard cost sheet.
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

Note that the input quantity multiplied by the cost per input equals cost per chair. Also note in this case
that manufacturing overhead (MOH) costs are being allocated on the basis of total direct labor hours
(DLH).

CC also disclosed the following actual information:

 5,000 pounds of plastic was purchased for $63,750 of which 4,600 was used in production.
 Molders were paid a total of $10,500 to work 575 hours and finishers were paid a total of
$29,000 to work 1,050 hours.
 1,100 plastic chairs were produced and sold during the year.

What is the direct materials usage variance based on the above information?

A. $3,750 Unfavorable
B. $2,400 Unfavorable
C. $2,400 Favorable
D. $3,750 Favorable

Question 8
What is the correct interpretation of a favorable labor mix variance?

A. The cost of the actual mix of labor (based on actual wage rates) was lower than the cost of the
standard mix of labor (based on standard wage rates).
B. Fewer total hours were used than were “allowed” to be used for actual production.
C. Actual wage rates were lower than standard wage rates.
D. The cost of the actual mix of labor (based on standard wage rates) was lower than the cost of
the standard mix of labor (based on standard wage rates).

Question 9
Which of the following options best describes the variable manufacturing overhead efficiency variance?

A. A measure of how actual total spending on variable manufacturing overhead compared to the
total amount that “should” have been spent based on the actual amount of the allocation base
used.
B. There is never a variable manufacturing overhead efficiency variance.
C. A measure of how efficiently variable manufacturing overhead was used.
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

D. A measure of how efficiently the allocation base used to allocate variable manufacturing
overhead was used.

Question 10
The standard cost sheet for Skyline Company’s most popular product shows 3 pounds of material at
$5.00 per pound and 1.5 hours at $24 per hour. During the most recent period, Skyline produced 500
units and incurred direct materials cost of $8,384 when it purchased 1,600 pounds and $17,480 for
direct labor costs fo760 hours of labor. What is Skyline’s materials price variance for the period?

A. $884, unfavorable
B. $384, unfavorable
C. $500, unfavorable
D. $9,096, unfavorable

Question 11
Wood Ridge Company’s standard rate of pay is $24 per direct labor hour. The actual payroll for 4,000
direct labor hours was $94,080. The standard hours for the amount produced was 4,100 hours. What is
Wood Ridge Company’s direct labor quantity variance?

A. $1,920, unfavorable
B. $2,400, favorable
C. $2,400, unfavorable
D. $1,920, favorable

Question 12
Variable overhead is applied on the basis of standard direct labor hours. If for a given period the direct
labor efficiency variance is unfavorable, the variable overhead efficiency variance will be:

A. unfavorable.
B. favorable.
C. the same amount as the labor efficiency variance.
D. indeterminable since it is not related to the labor efficiency variance.

Question 13
Fake Flowers (FF) paid more property tax on their manufacturing facility this year than they were
expecting. This would most likely cause an:

A. unfavorable fixed overhead volume variance.

B. unfavorable fixed overhead spending variance.
C. unfavorable variable overhead efficiency variance.
D. unfavorable variable overhead spending variance.

Question 14
A paint manufacturing plant has two white pigments that are substitutable for the same product.
Natural pigment costs $3/gallon, and artificial pigment costs $1/gallon. Standards call for 60% natural
and 40% synthetic, but the actual ratio used was 50% of each. The actual total quantity of both
ingredients was 30,000gallons while the budgeted total quantity was 32,000 gallons. What is the mix
variance for these ingredients?
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

A. $6,000 favorable
B. $10,400 favorable
C. $10,400 unfavorable
D. $6,000 unfavorable

Question 15
The Tiger Company uses labor, materials, and overhead variances and the Lion Company uses labor and
overhead variances, but not material variances. Which statement about Tiger and Lion is correct?

A. Tiger is likely a service company and Lion is likely a manufacturing company.

B. Tiger is likely a manufacturing company and Lion is likely a service company.
C. Both companies are likely to be manufacturing companies.
D. Both companies are likely to be service companies.

Question 16
Data on Goodman Company's direct labor costs are given below:

What was Goodman's standard direct labor rate?

A. $3.60
B. $3.80
C. $3.67
D. $4.00

Question 17
The following explanations appeared on last week's variance report for JT Engineering's purchasing
department. Which of these explanations could reflect negatively on the purchasing department?

A. Quantity discount.
B. Rush order.
C. Regular supplier on strike.
D. Repeat customer credit.

Question 18
The standard cost sheet for Eiger Mountain Manufacturing’s (EMM) most popular product shows 3
pounds of material at $6.00 per pound and 1.5 hours at $28.80per hour. During the most recent period,
EMM produced 500 units and incurred direct materials cost of $10,060 when it purchased 1,600 pounds
and $20,976 for direct labor costs for 760 hours of labor. What is EMM’s materials price variance for the
period?

A. $1,060, unfavorable
B. $600, unfavorable
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

C. $460, unfavorable
D. $10,916, unfavorable

Question 19
Which of the following results from substituting one direct material for another?

A. Efficiency variance
B. Yield variance
C. Sales mix variance
D. Mix variance

Question 20
If 200,000 machine-hours are budgeted for variable overhead at a standard rate of $5/machine-hour,
but 220,000 machine-hours were actually used at an actual rate of $6/machine-hour, what is the
variable overhead efficiency variance?

A. $100,000 favorable
B. $100,000 unfavorable
C. $320,000 unfavorable
D. $320,000 favorable

Question 21
The static budget fixed costs are $60,000 for static budget output of 24,000 units. Actual fixed costs are
$50,000 for 25,000 actual units. What is the flexible budget fixed costs?

A. $50,000
B. $60,000
C. $62,500
D. $48,000

Question 22
Designer Desks (DD) provided the following information:

Based on the above information, what is DD's fixed overhead spending variance?

A. $18,000 Favorable
B. $18,000 Unfavorable
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

C. $14,000 Favorable
D. $14,000 Unfavorable

Question 23
Which of the following options best describes the fixed manufacturing overhead efficiency variance?

A. A measure of how actual fixed manufacturing overhead spending compared to the budgeted
fixed manufacturing overhead.
B. A measure of how budgeted fixed manufacturing overhead compared to allocated fixed
manufacturing overhead.
C. There is never a fixed manufacturing overhead efficiency variance.
D. A measure of how actual fixed manufacturing overhead spending compared to allocated fixed
manufacturing overhead.

Question 24
Fox Tail, Inc. used 12,600 pounds of direct materials when the standard was 12,000 pounds. Fox Tail
paid $2.20 per pound when the standard is $2.00 per pound What is Fox Tail’s direct materials quantity
variance?

A. $1,200, unfavorable
B. $1,320, unfavorable
C. $2,400, unfavorable
D. $2,520, unfavorable

Question 25
The standard cost sheet for Eiger Mountain Manufacturing’s (EMM) most popular product shows 3
pounds of material at $6.00 per pound and 1.5 hours at $28.80per hour. During the most recent period,
EMM produced 500 units and incurred direct materials cost of $10,060 when it purchased 1,600 pounds
and $20,976 for direct labor costs for 760 hours of labor. What is EMM’s materials quantity variance for
the period?

A. $1,060, unfavorable
B. $460, unfavorable
C. $10,916, unfavorable
D. $600, unfavorable

Question 26
If budgeted fixed overhead costs are $400,000 for 50,000 budgeted direct labor hours (DLH), and the
actual direct labor usage was 48,000 DLH, what was the actual fixed overhead cost if the underapplied
overhead was $8,000?

A. $384,000
B. $408,000
C. $392,000
D. $376,000

Question 27
Fox Run Co. produces a product which requires 6 hours of direct labor at $25.60 per hour. During
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

October, Fox Run’s actual payroll was $314,496 and the company used 12,600 direct labor hours to
produce 2,000 units of the product. What is Fox Run’s direct labor price variance?

A. $8,064, favorable
B. $8,064, unfavorable
C. $7,296, unfavorable
D. $15,360, unfavorable

Question 28
Designer Desks (DD) provided the following information:

Based on the above information, what is DD's fixed overhead volume variance?

A. $14,000 Unfavorable
B. $14,000 Favorable
C. $18,000 Unfavorable
D. $18,000 Favorable

Question 29
What is the correct interpretation of an unfavorable labor yield variance?

A. More of each type of labor were used than were “allowed” to be used for actual production.
B. More total hours were used than were “allowed” to be used for actual production.
C. Actual wage rates were higher than standard wage rates.
D. The cost of the actual mix of labor (based on standard wage rates) was higher than the cost of
the standard mix of labor (based on standard wage rates).

Question 30
A company isolates its raw material price variance in order to provide the earliest possible information
to the manager responsible for the variance. The budgeted amount of material usage for the year was
computed as follows:

150,000 units of finished goods × 3 pounds/unit × $2.00/pound = $900,000

Actual results for the year were the following:

 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

The raw material price variance for the year was:

A. $20,000 unfavorable.
B. $10,000 unfavorable.
C. $60,000 unfavorable.
D. $9,800 unfavorable.

Question 31
Jura Corporation is developing standards for the next year. Currently XZ-26, one of the material
components, is being purchased for $36.45 per unit. It is expected that the component's cost will
increase by approximately 10% next year and the price could range from $38.75 to $44.18 per unit
depending on the quantity purchased. The appropriate standard for XZ-26 for next year should be set at
the:

A. current actual cost plus the forecasted 10% price increase.

B. highest price in the anticipated range to insure that there are only favorable purchase price
variances.
C. price agreed upon by the purchasing manager and the appropriate level of company
management.
D. lowest purchase price in the anticipated range to keep pressure on purchasing to always buy in
the lowest price range.

Question 32
One approach for developing standard costs incorporates communication, bargaining, and interaction
among product line managers; the immediate supervisor for whom the standards are being developed;
and the accountants and engineers before the standards are accepted by top management. This
approach would best be characterized as a(n):

A. authoritative approach.
B. engineering approach.
C. imposed approach.
D. participative approach.

Question 33
What is the correct interpretation of a favorable materials yield variance?

A. Fewer of each type of material were used than were “allowed” to be used for actual production.
B. Fewer total units of materials were used than were “allowed” to be used for actual production.
C. Actual material prices were lower than standard material prices.
D. The cost of the actual mix of labor (based on standard wage rates) was lower than the cost of
the standard mix of labor (based on standard wage rates).
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

Question 34
During the month of May, Tyler Company experienced a significant unfavorable material efficiency
variance in the production of its single product at one of Tyler's plants. All of the following reasons can
explain why the unfavorable variance arose except:

A. replacement production equipment had just been installed.

B. inferior materials were purchased.
C. workers used were less skilled than expected.
D. actual production was lower than planned production.

Question 35
Fake Flowers (FF) experienced a favorable direct materials price variance while also experiencing an
unfavorable direct materials usage variance. Which of the following best explains the likely cause of
these variances?

A. FF produced fewer units this period than expected.

B. FF purchased and used premium grade plastic to produce their flowers.
C. FF purchased and used low-quality plastic to produce their flowers.
D. FF produced more units this period than expected.

Question 36
Elk Creek Company’s most popular product requires specialized labor. These individuals are highly
productive, but also highly paid. The following standards have been developed for the product:

3 direct labor hours/unit

$45/direct labor hour

During November, Elk Creek produced 3,600 units and used 7,000 direct labor hours. The company’s
direct labor cost was $378,000. For Elk Creek, what is the difference between the actual amount paid
and the amount that should have been paid for the number of hours worked, and is the difference
favorable or unfavorable?

A. $63,000, unfavorable
B. $171,000, favorable
C. $108,000, favorable
D. $171,000, unfavorable

Question 37
Harper Company's performance report indicated the following information for the past month:

Harper's total overhead spending variance (OSV) for the month was:

A. $115,000 unfavorable.
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

B. $115,000 favorable.
C. $100,000 favorable.
D. $100,000 unfavorable.

Question 38
Joe is trying to calculate the materials price variance for the month of November. He has received a
report from the production and purchasing departments with the actual quantity and actual price of
materials used. What other value does he need to finish his calculation?

A. Standard quantity of materials.

B. Standard price of labor.
C. Standard quantity of labor.
D. Standard price of materials.

Question 39
During the first quarter, Tillman's Toys had an unfavorable budget variance of 6%. In the second quarter,
Tillman's variance dropped to .5%. How does the materiality of the first quarter variance differ from that
of the second quarter variance?

A. Both variances are significant. As a result, management will take corrective action after both the
first and the second quarters.
B. The first quarter variance is not significant, while the second quarter variance is significant. As a
result, management did not take corrective action after the first quarter but will take corrective
action after the second quarter.
C. Neither variance is significant. As a result, management will not take corrective action after
either the first or the second quarter.
D. The first quarter variance is significant while the second quarter variance is not. As a result,
management took corrective action after the first quarter but will not take corrective action
after the second quarter.

Question 40
If four input units of direct material are allowed for producing one output unit and an input unit costs
$20, then the standard direct material cost would be:

A. $80 per output unit.

B. $20 per output unit.
C. $40 per output unit.
D. $5 per output unit.

Question 41
Sanderson Manufacturing makes paint-brushes and other paint supplies. Their 3" paint-brush has a
standard of 0.28 pounds of bristles, and one pound of bristles costs Sanderson $3.45 to purchase. In
March, Sanderson made 12,000 3"paint-brushes and used 3,400 pounds of bristles. This cost the
company $11,730 What was the difference in the number of pounds of bristles Sanderson should have
used compared to the number of pounds they actually used?

A. They used 40 pounds less than they should have.

B. They used 40 pounds more than they should have.
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

C. They used 138 pounds more than they should have.

D. They used 138 pounds less than they should have.

Question 42
A standard that represents the optimum level of performance under perfect operating conditions is
called a(n):

A. normal standard.
B. controllable standard.
C. ideal standard.
D. materials price standard.

Question 43
Marten Company has a cost-benefit policy to investigate any variance that is greater than $1,000 or 10%
of budget, whichever is larger. Actual results for the previous month indicate the following:

The company should investigate:

A. neither the material variance nor the labor variance.

B. the labor variance only.
C. both the material variance and the labor variance.
D. the material variance only.

Question 44
Use of a standard cost system can include all of the following advantages except that it:

A. permits development of flexible budgeting.

B. allows employees to better understand what is expected of them.
C. emphasizes qualitative characteristics.
D. assists in performance evaluation.

Question 45
Which of the following is the most probable reason a company would experience an unfavorable labor
rate variance and a favorable labor efficiency variance?

A. The mix of workers assigned to the particular job was heavily weighted toward the use of new,
relatively low-paid unskilled workers.
B. The mix of workers assigned to the particular job was heavily weighted toward the use of
higher-paid, more experienced individuals.
C. Because of the production schedule, workers from other production areas were assigned to
assist this particular process.
D. Defective materials caused more labor to be used in order to produce a standard unit.
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

Question 46
Which of the following standard costing variances would be least controllable by a production
supervisor?

A. Overhead efficiency
B. Labor efficiency
C. Overhead volume
D. Material usage

Question 47
The JoyT Company manufactures Maxi Dolls for sale in toy stores. In planning for this year, JoyT
estimated variable factory overhead of $600,000 and fixed factory overhead of $400,000. JoyT uses a
standard costing system, and factory overhead is allocated to units produced on the basis of standard
direct labor hours. The denominator level of activity budgeted for this year was 10,000 direct labor
hours, and JoyT used 10,300 actual direct labor hours.

Based on the output accomplished during this year, 9,900 standard direct labor hours should have been
used. Actual variable factory overhead was $596,000, and actual fixed factory overhead was $410,000
for the year. Based on this information, the variable overhead spending variance (VOSV) for JoyT for this
year was:

A. $22,000 favorable.
B. $24,000 favorable.
C. $22,000 unfavorable.
D. $24,000 unfavorable.

Question 48
Garza Toys made 4,000 teddy bears for the Christmas season. The company used 3,800 pounds of direct
materials that cost Garza $6,308. The standard quantity of materials is 1 pound per unit and $1.50 per
pound. The materials price variance is:

A. $608, favorable.
B. $608, unfavorable.
C. $308, unfavorable.
D. $300, favorable.

Question 49
Each of the following terms is another name for a standard cost, except:

A. expected cost.
B. planned cost.
C. predicted cost.
D. optimal cost.

Question 50
The JoyT Company manufactures Maxi Dolls for sale in toy stores. In planning for this year, JoyT
estimated variable factory overhead of $600,000 and fixed factory overhead of $400,000. JoyT uses a
standard costing system, and factory overhead is allocated to units produced on the basis of standard
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

direct labor hours. The denominator level of activity budgeted for this year was 10,000 direct labor
hours, and JoyT used 10,300 actual direct labor hours.

Based on the output accomplished during the year, 9,900 standard direct labor hours should have been
used. Actual variable factory overhead was $596,000, an actual fixed factory overhead was $410,000 for
the year.

Based on this information, the volume variance for JoyT for this year is:

A. $10,000 unfavorable.
B. $4,000 unfavorable.
C. $10,000 favorable.
D. $4,000 favorable.

Question 51
If 0.7 manufacturing labor hours of input are allowed for producing one output unit and labor hours cost
$27, then the standard cost of labor would be:

A. $18.90 per output unit.

B. $8.10 per output unit.
C. $35.10 per output unit.
D. $45.90 per output unit.

Question 52
Nuts and Bolts, Ltd. has normal budgeted overhead costs of $235,520 and a normal capacity of 92,000
direct labor hours for the third quarter, which are evenly distributed between months. N&B allows 0.01
direct labor hours per unit, and they produced 3,000,000 units in the last month of the quarter. This
took the company 31,000 labor hours. N&B had variable overhead costs of $55,000 and fixed overhead
costs of $42,000 in the month. What was the overhead variance for the month?

A. $20,200 unfavorable.
B. $20,200 favorable.
C. $17,640 favorable.
D. $17,640 unfavorable.

Question 53
Ardmore Enterprises uses a standard cost system in its small appliance division. The standard cost of
manufacturing one unit of Zeb is:

The budgeted variable factory overhead rate is $3 per labor hour, and the budgeted fixed factory
overhead is $27,000 per month. During May, Ardmore produced 1,650 units of Zeb compared to a
normal capacity of 1,800 units. The actual cost per unit was:
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

The labor rate variance for May is:

A. $5,400 favorable.
B. $1,980 unfavorable.
C. $1,980 favorable.
D. $0.

Question 54
Waneta received a report from the production and purchasing departments with the following values
for April:

 Actual materials quantity: 14,000 pounds

 Total actual cost: $18,450
 Standard materials quantity: 2.7 pounds/unit
 Standard price: $1.35/pound
 Units made: 5,200

Three days later, she got a correction report from the purchasing department that they forgot to add
shipping to the price of the materials. Shipping for April cos$585. How much would Waneta's materials
price variance change for the month of April? Do not round any calculations.

A. $585 unfavorable.
B. $585 favorable.
C. $135 unfavorable.
D. $135 favorable.

Question 55
For a given time period, a company had a favorable material quantity variance, a favorable direct labor
efficiency variance, and a favorable fixed overhead volume variance. The following factors could have
caused all three variances, except:

A. the purchase of higher-quality materials.

B. the use of lower-skilled workers.
C. the purchase of more efficient machinery.
D. an increase in production supervision.

Question 56
James received a report from the production and purchasing departments with the following values for
January:

 Actual materials quantity: 90,000 pounds

 Total actual cost: $47,200
 Standard materials quantity: 5.5 pounds/unit
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

 Standard price: $0.55/pound

 Units made: 16,300

Two days later, he got a correction report from the purchasing department that they found another
invoice for $6,200. How much would James’s materials price variance change for the month of January?

A. $6,200 favorable.
B. $6,200 unfavorable.
C. $3,900 unfavorable.
D. $3,900 favorable.

Question 57
Chester Tools realized that they had an unfavorable variance in their screwdriver production for the
month of May. Their first plan of action was to talk to the purchasing department. What type of variance
did they likely have?

A. Materials price variance

B. Materials quantity variance
C. Labor price variance
D. Labor quantity variance

Question 58
Chair Company (CC) has provided the following standard cost sheet.

CC also disclosed the following actual information:

 Actual total delivery costs: $5,302.50.

 1,100 plastic chairs were produced and sold during the year.
 Actual chairs delivered: 1,050 (50 chairs were picked up by customers).

What is the sales and administrative (S&A) overhead efficiency variance based on the above
information?

A. $250.00 Favorable
B. $250.00 Unfavorable
C. $52.50 Unfavorable
D. $52.50 Favorable
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

Question 59
Chair Company (CC) has provided the following standard cost sheet.

CC also disclosed the following actual information:

 Actual total delivery costs: $5,302.50.

 1,100 plastic chairs were produced and sold during the year.
 Actual chairs delivered: 1,050 (50 chairs were picked up by customers).

What is the sales and administrative (S&A) overhead price variance based on the above information?

A. $52.50 Favorable
B. $52.50 Unfavorable
C. $250.00 Favorable
D. $250.000 Unfavorable

Question 60
Automotive Parts Overstock (APO) has normal budgeted overhead costs of $348,400 and a normal
capacity of 52,000 direct labor hours for the first quarter, which are evenly distributed between months.
APO allows 1.2 direct labor hours per unit, and the company produced 15,000 units in the second month
of the quarter. This took APO 16,500 labor hours. APO had variable overhead costs of $52,200 and fixed
overhead of $41,400 costs in the month. What was the overhead variance for the month?

A. $27,000 favorable.
B. $27,000 unfavorable.
C. $16,950 favorable.
D. $16,950 unfavorable.

Question 61
Ramble Wood, Inc. produces a product which requires 6 hours of direct labor at $32 per hour. During
February, Ramble Wood’s actual payroll was $393,120 and the company used 12,600 direct labor hours
to produce 2,000 units of the product. What is Ramble Wood’s direct labor quantity variance?

A. $19,200, unfavorable
B. $10,080, unfavorable
C. $9,120, unfavorable
D. $10,080, favorable
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

Question 62
Murgia Assembly used 30,000 pounds of metal to make the shells of 200 cars. The metal cost $150,000.
The standard quantity of materials is 125 pounds per unit and the standard price is $5.00 per pound.
Recently, the company installed a new assembly line to increase production, which required it to hire
new employees Based on this, what is the most likely reason for Murgia’s increased materials usage?

A. Inexperienced employees
B. Inefficiency of new machinery
C. Higher production levels
D. Inferior quality of raw materials

Question 63
Randall Company uses standard costing and flexible budgeting and is evaluating its direct labor. The
total direct labor budget variance can usually be broken down into two other variances identified as the:

A. direct labor cost variance and the direct labor volume variance.
B. direct labor rate variance and direct labor volume variance.
C. direct labor cost variance and direct labor efficiency variance.
D. direct labor rate variance and direct labor efficiency variance.

Question 64
Accounting Training, Inc. (ATI) provides continuing education seminars. These seminars are sold as a
continuing education event to accounting firms, which the schedule to bring in their own employees.
Seminars are held at hotels in a location that is convenient to the client organization. ATI has a large
number of certified seminar instructors that it contracts to travel to the event and provide the training.
The standard price for a training seminar event is $50,000. Below arATI's standard variable costs for a
seminar event.

In addition to the standard variable costs listed above, ATI has budgeted $100,000 as an annual fixed
cost for advertising.

For the year just completed ATI had originally planned for 80 seminar events with 75 participants per
event. ATI actually held 77 seminar events for the year with an average of 78 participants at each event
and collected $3,734,500 in revenue. ATI's actual costs and activity volumes are listed below.
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

What is the hotel spending variance and the advertising spending variance?

A. Hotel Spending Variance: $77,000 Favorable; Advertising Spending Variance: $12,000

Unfavorable.
B. Hotel Spending Variance: $77,000 Favorable; Advertising Spending Variance: $12,000 Favorable.
C. Hotel Spending Variance: $77,000 Unfavorable; Advertising Spending Variance: $12,000
Unfavorable.
D. Hotel Spending Variance: $77,000 Unfavorable; Advertising Spending Variance: $12,000
Favorable.

Question 65
Clarkdale Industries recently purchased a new energy-efficient furnace to melt glass that will be shaped
into light bulbs. Before the purchase of the furnace, the total overhead variance was increasingly
unfavorable each month. What effect do you expect this to have on Clarkdale's total overhead variance?

A. The overhead variance will become more favorable.

B. The overhead variance will continue to become increasingly unfavorable.
C. The overhead variance will remain unfavorable at the present amount but will not be more
unfavorable each month.
D. The overhead variance will be zero.

Question 66
What type of direct material variances for price and usage will arise if the actual number of pounds of
materials used exceeds standard pounds allowed, but at the same time actual price was less than
standard price?

A. Usage: Favorable, Price: Unfavorable

B. Usage: Favorable, Price: Favorable
C. Usage: Unfavorable, Price: Favorable
D. Usage: Unfavorable, Price: Unfavorable

Question 67
When using a flexible budgeting system, the computation for the variable overhead spending variance is
the difference between:

A. the amount applied to work-in-process and actual variable overhead.

B. actual variable overhead and actual inputs times the budgeted rate.
C. actual variable overhead and the previously budgeted amount.
D. the previously budgeted amount and actual inputs times the budgeted rate.

Question 68
In a standard cost system, the investigation of an unfavorable material usage variance should begin with
the:

A. plant controller only.

B. purchasing manager only.
C. production manager and/or the purchasing manager.
D. production manager only.
 Part 1: Variance Analysis (Direct Material, Direct Labor, Manufacturing Overhead)

Question 69
Under which of the following circumstances is Sammy's Shirts likely to consider a budget variance
significant and take action to correct the variance?

A. When actual costs exceed budgeted costs by .5%.

B. When actual costs are lower than budgeted costs by 2%.
C. When actual costs are lower than budgeted costs by 1%.
D. When actual costs exceed budgeted costs by 8%.

Question 70
If 0.6 manufacturing labor hours of input are allowed for producing one output unit and labor hours cost
$15, then the standard cost of labor would be:

A. $9 per output unit.

B. $15 per output unit.
C. $90 per output unit.
D. $6 per output unit.